China publishes blockchain service, identity regulations

Yesterday the office of China’s Central Cyberspace Affairs Commission (CAC) published the final draft of rules that aim to standardize the country’s blockchain-related service providers. The “Blockchain Information Service Management Regulations” come into force on February 15, 2019. The rules, first announced in October last year, involve censorship and ban anonymous users.

The regulations will apply to any organization operating in China that is considered a blockchain information service provider and is one of the first regulations covering the country’s blockchain industry, outside of cryptocurrency bans. The CAC defines blockchain information service providers as “entities or nodes” that provide information services or technical support to the public. This refers to both companies and individuals using blockchain technology through servers, desktop sites and mobile apps.

The providers have to “accept social supervision“ or censorship, and all blockchains that operate in China will not be allowed to have anonymous users. Hence, end users will need to register with their national identity cards, mobile phones or company registration to use the service.

The regulations are aiming to:

Regulate blockchain information service activities

Protect national security and public interests

Safeguard the legitimate rights and interests of China’s citizens, legal entities, and other organizations

And promote blockchain

Besides following other rules, service providers are obligated to “keep relevant records and report to relevant authorities,” as well as to prevent blockchain technology from “producing, duplicating, publishing, and disseminating” content that is banned by Chinese laws.

The lawmakers require blockchain providers to report to the organization within ten days of the start of offering products or services to the public.

Many of the 24 rules specify sensible things such as using the relevant technology, cybersecurity, and appropriate disclosures to users. Non-compliance involves fines provided it‘s not a criminal infraction.

Cross border?

One concern relates to cross border enterprise blockchains. There‘s a push for trade finance and cargo tracking across borders. But there‘s potential for nodes to be hosted in China. For transactions with a Chinese party, one would need to accept supervision, blockchain or not. But what about other transactions hosted on the same node which don‘t relate to Chinese parties, even though they‘re encrypted?